1. IBM
IBM’S VALUES AND STRATGIES
Introduction to International Business
AIU Online
Prof. Ryan Repich
Victoria Rock
February 5, 2012
1

2. IBM
ABSTRACT
IBM is an example of an international organization with subsidiaries in several countries such as
Algeria, Egypt, Hong Kong, China, the United States and many other countries. In this paper we
will discuss many aspects of this company and the strategies they have used to become one of
the top leaders in technology today.
2

3. IBM
COMPANY VALUES
Chairman, President and CEO Samuel J. Palmisano stated in an article titled; Our Values at
Work on being an IBMer, where they brought together thousands of IBMer’s from around the
world to discuss the companies’ values last summer. They determined that IBM’s actions will be
driven by these values:
Dedication to every client’s success
Innovation that matters, for our company and for the world
Trust and personal responsibility in all relationships.
Mr. Palmisan said, “We are getting back in touch with what IBM has always been about and
always will be about, in a very concrete way.” (Palmisano, 2010)
MISSION STATEMENT
Over ten years ago, IBM saw that change was coming, so they worked to remake the
company as a globally integrated enterprise. As a result they have been able to invest in future
sources of growth and provide record returns for shareholders. The key tenet of their strategy
was:
• Deliver value to clients through integrated business and IT innovation
• Build and expand strong positions in growth initiatives
• Shift their business mix to higher-value software and services
• Become a premier global integrated enterprise
In an Annual Statement to Stockholders, the CEO defined the corporate mission as one of
capturing new growth in order to provide record returns for its shareholders, as well as position
the company for continued growth. In order to do this, they had to change their portfolio by
leveraging a globally integrated enterprise in order to make targeted growth investments. They
were able to created a business value for their clients and solve business problems through
integrated solutions. (IBM, 2012)
PRODUCT STRATEGY
3

4. IBM
IBM's core business model supports two principal goals: help clients succeed and providing
long-term value to shareholders. Their global capabilities include; services, software, systems,
fundamental research and related financing. During 2010, their focus is on four major growth
opportunities:
Growth markets: In both mature and growth economies, infrastructure represents a
major technology and business opportunity, with more than $2 trillion in fiscal
stimulus earmarked by governments.
Analytics: IBM's new analytics service line draws on 4,000 dedicated consultants,
plus 200 mathematicians and advanced analytics experts in IBM Research. We have
invested $10 billion in 14 acquisitions since 2005, creating seven analytics solution
centers around the world.
Industry: Chemicals & Petroleum (Venezuela) 3-D seismic imaging technology
helped Tricon Geophysics cut processing time by 50 percent and realize a 40-percent
savings in power and cooling infrastructure, and operational costs.
Cloud and next-generation data center: These new models are enabling efficient
consumption and delivery of IT-based services. More than 18 million people use
Lotus Live, IBM's cloud- based collaboration suite. More than 200 IBM researchers
are working on breakthroughs in areas like cloud security and privacy.
Smarter planet: We estimate that smarter planet increases IBM's addressable
opportunity by 40 percent over the decade ahead. The sampling on this map of recent
partnerships with more than 300 clients illustrates the reach of smarter solutions
across industries and markets.
With this mix of growth opportunity crossing both industry and geographical boundaries,
IBM is currently pursuing engagements in more than a dozen industries. (IBM, 2012)
DISTRIBUTION STRATEGY
IBM's distribution of its resources, capabilities, facilities as well as the reach of its
product is truly global, with major operations including Global Technology Services, Global
Business Services, Software segment, Systems and Technology segment, and Global
Financing segment. Their global services are a critical component of the company's strategy
of providing IT infrastructure as well as business insight and solutions to clients. While
solutions often include industry-leading IBM software and systems, other suppliers' products
are also used if a client solution requires it. Worldwide organizations play a key role in the
delivery of value to clients. Integrated teams of consultants and product specialists, and the
4

5. IBM
delivery fulfillment team are crucial in improving clients' business performance. These
teams deliver value through understanding the clients' businesses and needs, and bring
together capabilities from across IBM and an extensive network of Business Partners to
develop and implement solutions, thus combining global expertise with local experience.
(IBM, 2012)
PRICING STRATEGY
Sometimes, given the lack of explicit information regarding pricing strategies used by a
specific firm, revenue provides an interesting substitute. For example, approximately 60
percent of the Global Services revenue is annuity-based, meaning they are coming from
outsourcing, maintenance and custom application management services. The majority of
IBM's revenue occurs in industries broadly grouped into six sectors:
Financial Services: Banking, Financial Markets, Insurance
Public: Education, Government, Healthcare, Life Sciences
Industrial: Aerospace and Defense, Automotive, Chemical and Petroleum,
Electronics
Distribution: Consumer Products, Retail, Travel and Transportation
Communications: Telecommunications, Media and Entertainment, Energy and
Utilities
General Business: Mainly companies with fewer than 1,000 employees (IBM,
2012)
COMPETITIVE ENVIRONMENT
IBM's competitive environment has changed drastically. During the last decade, the
conventional wisdom that IT growth of the 1990s would continue even after the dot-
com bust, most believed it would resume. Industry professionals thought that buyers of
IT would continue to self-integrate which would mean that IBM's industry would
remain highly disaggregated and client/server computing would become the pre-
dominant enterprise model. Looking forward to the next decade, IBM concluded that
the views of the last decade were no longer tangible given the undercurrents of
fundamental change and perceived that major shifts were underway that would reshape
the industry and the global economy.
5

6. IBM
Changes in the world, technology, and client demand were the main factors that led
IBM to transform its mix of products, services, skills and technologies, and getting out
of commodity businesses like PCs and hard disk drives. By doing this, IBM amassed
industry expertise and re-invented the way they deployed that expertise by shifting
skills and decision making closer to the clients needs. They invested more in teams and
capabilities in emerging markets around the world, and accelerated the global
integration of its operations. Today IBM's portfolio is built around embedded
technologies, such as SOA, service-oriented architecture, business intelligence and
analytics. (IBM, 2012)
TARGET MARKET
IBM's investments in 2010 are focused on four high-potential opportunities:
Growth Markets: IBM serves clients in more than 170 countries around the
world. And since 2005, these markets have expanded their contribution to
IBM's geographic revenue by a point a year, growing at least 8 points faster than
major markets over the last three years.
Analytics: Data is being captured today as never before, both from the so-called
Internet of Things and hundreds of millions of individuals using social media.
In just three years, IP traffic is expected to total more than half a zettabyte. It
includes rich media of all kinds, from video, audio, images, avatars, simulations,
and applications.
Cloud and Next-Generation Data Center: As the planet becomes more
interconnected, IBM claims that its computing model is evolving to support it.
Smarter Planet: Describes the infusion of knowledge into the way the world
actually works. This means that industries, infrastructures, processes, cities and
entire societies can be more productive, efficient and responsive. (IBM, 2012)
COMMUNICATION STRATEGY
IBM's clear strategy has enabled steady results in core business areas. The key
tenets of their strategy are:
6

7. IBM
Deliver value to enterprise clients through integrated business and IT
innovation
Build/expand strong positions in growth initiatives
Shift the business mix to higher-value software and services
Become the premier globally integrated enterprise
These priorities reflect a broad shift in client spending away from "point products"
and more towards integrated solutions, as companies seek higher levels of business
value from their IT investments. They have been able to deliver this enhanced client
value thanks to its strengthened capabilities, aligned with client priorities. (IBM, 2012)
IMPACT OF CULTURE ON GLOBAL OPERATIONS
Since 2005, global integration has enabled IBM to cut expenses by $5 billion and
improve service quality. They have shifted resources toward building client
relationships and employee skills, while positioning themselves in new market
opportunities such as business analytics, smarter cities, and large-scale infrastructure
build outs underway in emerging markets. In the five years since the global integration
began, IBM has pioneered a new operating model, changing from a classic
"multinational," in to a global model with one set of processes, shared services and
broadly distributed decision making, carried out by a highly skilled global workforce
and managed by a common set of values. IBM's shift to a globally integrated model
allowed the company to refocus its organizations on generating growth and serving
clients. (IBM, 2012)
KEY MANAGEMENT ISSUES AND DRIVERS FOR 2010
Historical revenue growth
Margin Expansion
Share Repurchases
Growth initiatives and future acquisitions
Retirement related costs
7

8. IBM
With the key management issues listed above, IBM’s management concerns are still
somewhat traditional. In the event that they cannot meet their growth mandate
organically, IBM will need to pursue more aggressive growth initiatives and external
acquisitions as a way to foster the growth that its shareholders demand. Finally, the
future costs of unfunded and variable commitment costs, such as those associated with
retirement or pension continue to be a huge concern for executive management. (IBM,
2012)
8

9. IBM
REFERENCE
IBM. (2012). Retrieved from IBM: http://www.ibm.com/us/en/
Palmisano, S. J. (2010). Our Values at Work on being an IBMer. Retrieved from IBM:
http://www.ibm.com/ibm/values/us/
9